What’s Trending

Back to What's Trending

Prompt Payment and Adjudication for Federally Owned Projects Compared to Ontario

Image for Prompt Payment and Adjudication for Federally Owned Projects Compared to Ontario Blog

The Federal government has enacted legislation implementing a new prompt payment and adjudication regime for construction projects owned by the Federal government. The Federal Prompt Payment for Construction Work Act[1] (the “Federal Act”) became law on June 21, 2019 and will come into force on a date to be determined by Cabinet. The Federal Act prescribes mandatory timelines for payment on construction projects and also introduces an adjudication mechanism to resolve payment disputes. While the Federal Act mirrors the provisions in Ontario’s Construction Act[2] (the “Ontario Act”) with respect to prompt payment and adjudication in many respects, there are differences of which to be aware.

As in the Ontario Act, the payment obligations under the Federal Act are triggered when the owner receives a “Proper Invoice” from the contractor. The requirements for a “Proper Invoice” are prescribed in the Ontario Act[3] and they will be prescribed for the Federal Act in a future regulation.[4] Under either Act, once the contractor submits a “Proper Invoice” to the owner, payment must be made within 28 days.[5]

The precise timelines for payment by contractors and sub-contractors in the Ontario Act and Federal Act vary slightly. Under the Ontario Act, payment must be made by contractors and sub-contractors within 7 days from the date they receive payment. Under the Federal Act, payment must be made within 7 days from the last date they could have been paid. The following illustrates the timelines for payment for both the Federal Act and Ontario Act:
Prompt Payment Process Graphic
The Federal government has launched a webpage which discloses the date of all payments made in sums greater than $100,000.00 from Public Services and Procurement Canada to contractors. As a result, sub-contractors that are generally not privy to such information can determine their due date(s) for payment.

The “Notice of Non-Payment”, a prescribed form that a payer must give to a payee if payment on a contract or sub-contract is disputed, is a common feature of both the Ontario Act and Federal Act.

The Federal Act also introduced an adjudication mechanism[6] similar to the regime in Ontario.[7] Where a contractor or sub-contractor has not been paid, in full or in part, they may refer the matter to an adjudicator for timely determination. Much of the Federal adjudication regime is unknown at this point because the regulations regarding the eligibility requirements, powers and fees of an adjudicator, or the prescribed forms and procedures that govern adjudications, have not yet been released.

The interim adjudication mechanism in Ontario, at this point at least, is much broader than its Federal counterpart. The Federal Act only permits an adjudicator to make a determination on disputes regarding non-payment,[8] whereas the Ontario Act permits an adjudicator to determine a wide variety of issues, including the valuation of services and materials and payment of holdback.[9]

Another difference between the two pieces of legislation is with regards to their transitional rules. The prompt payment and adjudication provisions of the Ontario Act will only apply to contracts entered into after October 1, 2019 and where the tendering process began after October 1, 2019.[10] This ensures the entire project is governed by the same set of rules. However, the Federal Act will apply to all contracts one year after the legislation comes into force, regardless of when the contract was entered into.

The Federal Act is limited in its application. It will only apply to construction projects on properties owned by the Federal government. Furthermore, the Federal Act permits the Governor in Council to exempt provinces from the application of some of its provisions provided that the prompt payment and adjudication regime in that province is “reasonably similar” to the provisions in the Federal Act.[11]  In addition, the Governor in Council may also exempt specific projects from the application of the Federal Act.[12]

Since Ontario already has its own prompt payment and adjudication regime, it is conceivable that construction projects owned by the Federal government and located in Ontario may be exempted from the Federal Act. If that happens, then the existence of the Federal Act will have no relevance to projects in Ontario. For the time being, however, developments concerning the Federal Act deserve continued monitoring.

[1] Federal Prompt Payment for Construction Work Act, being Division 26 of Part 4 of the Budget Implementation Act, 2019, No. 1, SC 2019, c 29, s 387 (“FPPCWA”).

[2] Construction Act, RSO 1990, c C.30 (“Construction Act”).

[3] Construction Act, supra fn 2, s 6.3.

[4] FPPCWA, supra fn 1, s 22(b).

[5] Consruction Act, supra fn 2, s 6.4

[6] FPPCWA, supra fn 1, s 16.

[7] Construction Act, supra fn 2. Part II.1.

[8] FPPCWA, supra fn 1, s 16.

[9] Construction Act, supra fn 2, s 13.5.

[10] Construction Act, supra fn 2, s 87.3(4).

[11] FPPCWA, supra fn 1, s 6.

[12] FPPCWA, supra fn 1, s 7.

Pallett Valo LLP has earned my trust and loyalty based on their extensive legal knowledge and expertise, further enhanced by their prompt service and attention to detail.
Mark Hallink